What is Social Trading?
Created on 11 Feb 2022
Wraps up in 6 Min
Read by 4.9k people
Updated on 11 Jul 2022
In an era when people wouldn’t (and probably couldn’t) eat their meals without uploading them on social media, isn’t it fair and about time that the trading community joins in too?
What if I tell you such exclusive communities already exist? A community where you could share your portfolio with your friends, analyze portfolios of different stock market experts, and invest your money in those portfolios?
Hua na? FOMO hua na?
This so-interesting form of trading is called Social Trading, and one of the first social trading platforms - etoro was launched in 2010. And since then social trading apps like etoro, octafx, public.com have become quite popular but all of them were outside of India, YET!
Today, we will dive so so deep into this topic, that by the time you finish reading, you would want to abandon the social media platforms and start social trading.
What is Social Trading?
Social Trading is a form of investing that allows investors to observe the trading behaviour of their peers and expert traders and mimic them. In this, members of the community are able to earn money jointly.
It follows the rules of social media, which are essentially communication, exchange of information, mutual help and partnership. Traders have the option of copying others’ trades, or they can proportionately allocate their funds in the same portfolio.
This is more of a general concept where a pro trader posts their thoughts, company news, charts, market analysis, suggestions etc., and others subscribe to it. The Telegram and Twitter channels you follow, who add mirch-masala to their recommendations, are practicing nothing but social trading. Some traders may mimic precisely what the pro-investor said; some may tweak it up a bit.
Social trading vs Copy Trading vs Mirror Trading
All the terms mentioned above are used interchangeably in the trading world, but some minor differences make them not-so-interchangeable.
Copy trading is a form of social trading where the trades are automated, and the assets owned by the user are based entirely on the other trader’s picks. The user doesn’t really have to go through the learning curve to be able to start seeing some returns.
All they have to do is proportionally allocate whatever their balance is, into the stocks in the trader’s portfolio. This way, the total sum could be invested in multiple portfolios. At the same time, the risks would be reduced, and the user would have the option of testing out different top traders.
In this form of investing, the autonomy of individual investors is compromised, and the assets are traded based on algorithmic strategies. The user has to choose from a list of trading criteria and customize their own trading strategies. These criteria include investment goals, user’s preferred asset classes and risk tolerance.
Mirror trading is basically applying general strategies from various top traders into a portfolio instead of copying the trade just as it is.
Benefits of Social Trading
Let's brush through why social trading is a 'yay-yay':
Money for the Novice:
Novice traders losing a chunk of money when they enter the market is so common that it almost seems like a tradition. With social trading, even the traders with no knowledge and experience can earn money by following others.
Traders also have an opportunity to subscribe to the signals of professional traders and copy their trades either manually or automatically. Automatically how? We’ll get to that as well.
Learn and Grow (your money):
In social trading, traders have the opportunity to study the strategies of top professionals who have years of expertise. This way, their trading game strengthens and at the same time, there is a lowered risk of incurring losses.
Autonomy to Traders:
Traders who engage in automated trading are confined with predefined rules and programmes for entering and exiting trades. But in the case of social trading, the trader has more autonomy on decisions related to each trade. Thus, a lot of risks of automated trading are eliminated.
Since a lot of beginners, intermediate and professional traders engage through social trading networks, there are multiple opinions on a specific investment or on strategies that are collectively analyzed.
A lot of (so-called) pro-investors have created channels in Telegram and post their opinion there. These "so-called pro investors" don't put their money where their mouth is. This is regulated in social trading platforms to track the exact amount the investor has invested.
Risks of Social Trading
Now, let's see why Social Trading could be a 'nay-nay':
Since there are a lot of stocks to be analyzed and a lot of experts’ portfolios to be studied, social trading could be pretty time-consuming.
Since in social trading, trades are placed manually instead of the whole process being automated, there are very high chances that you miss on some opportunities if you show laxity, even for a bit.
Social trading is done in communities, and communities have the tendency of over-hyping news or market sentiments. This creates a false market indication.
Parameters to consider while Social Trading.
Suppose you found a trader with good percentage returns. But are good returns enough to put your hard-earned money without even a bit of research? No, right?
Here are just a few parameters to keep in mind when you decide to start social trading:
Trader’s Credentials - Career, membership, experience, popularity
Volume signals - Trades per month, total number of trades
Performance signals - Winning trades, winning months, performance of the current month, performance of the current year
Risk signals - Risk profile of the trader
You could study and apply all of these separately or use a combination of these to narrow down your choices.
What’s in it for the Pro Investor?
The natural question you might have by now is, why would a person, who spent so much time studying the basics and then, learned how the market works, would make his portfolio public? The answer would be- to gain credibility.
The higher the returns that the expert’s portfolio provides, the higher would be the social status of him/her in the community. In some cases, these traders also get a percentage as commission from the returns of the users.
From our discussion so far, it is obvious that it is a win-win for the users as well as for the pro traders. But, where would you find such a community? Where would you find such experts, who are willing to make their portfolio public? We have an answer to that as well.
Trinkerr: The Facebook of share markets?
The amount of money you could have earned is inversely proportional to the amount of time you spend on a social media app, say Facebook (now, Meta). There, you earn nada and lose your productive hours as well. But, what if there was a way to earn some bucks while you're social networking?
This is where Trinkerr makes a grand entry. Trinkerr is a social trading platform that helps you discover multiple portfolios where you can invest in just a few taps. These portfolios are created by expert traders who are an integral part of Trinkerr’s platform.
Since all the bets placed are tracked in real-time, Trinkerr ensures that there is complete transparency in the information that the users have access to.
Here is why using Trinkerr for social trading would be beneficial to you-
You can check verified returns and past track records of stock market experts.
You can see which stocks the experts currently hold with their real money.
You can invest in their portfolios and get all the stocks they hold at no extra cost.
You will get notified whenever a trader you have invested in makes a trade.
Quantities of stocks are calculated for you in proportion to the expert’s portfolio. Just as it happens in mutual funds, you just have to specify the amount you want to invest, and the rest will be taken care of.
You can add portfolios that you like to your watchlist, and the returns are calculated from the day you ‘watchlist’ them.
You can choose to invest or exit anytime you like from the My Investments section.
Moreover, Trinkerr supports 14 of the major brokers that Indians open their accounts with.
You might wonder, if Trinkerr is facilitating the trades, where would your money and shares be held? They will be where they should be - with your broker. Your existing broker will use the funds in your brokerage account and place the stocks in your existing Demat account. Your broker will handle the entire transaction, so it's as safe and secure as ever.
We try to add value with every article we promote, and so, we saved the best for the last. Trinkerr does it all for free! FREE! FREE! FREE! (Aamir Khan’s voice echoing)
We part for now!
Let’s circle back to where we started. In an era where everything becomes a trend in just a few days, shouldn’t we make it a trend to unfurl financial literacy and invest and grow together?
We leave you with this question to ponder upon, and until then, happy investing!
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